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IMF Sees World Economy Shrinking

imf-buildingThis looks kind of obvious, but when it comes from a markets guru such as the IMF managing Director Dominique Strauss Kahn it can be taken quite seriously. The Director also mentioned that the first recovery will come in the first two quarters of the next year.

The IMF said last month in two reports prepared for a meeting of Group of 20 nations this week that the global economy will shrink as much as 1 percent this year – its first decrease since World War Two. He also mentioned at the G20 meeting held today that the European Central Bank (ECB) might buy toxic assets with newly created money to boost the money supply.
Well, this might not be so good news, since the newly created monetary mass will mostly generate inflation, especially since the GDP of most nations is falling. But, as in the U.S., the main worry of the developed nations (and the main topic of the G20 discussions held these days) seems to be the worldwide fall in GDP and the decrease of wealth. This way the policy makers are determined to counteract the wealth destruction by any means, if this implies inflation or other sidelines social effects.

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